Correlation Between DAX Index and HANetf II

Can any of the company-specific risk be diversified away by investing in both DAX Index and HANetf II at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DAX Index and HANetf II into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAX Index and HANetf II ICAV, you can compare the effects of market volatilities on DAX Index and HANetf II and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DAX Index with a short position of HANetf II. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and HANetf II.

Diversification Opportunities for DAX Index and HANetf II

-0.1

Correlation Coefficient

DAX Index  HANetf II

Good diversification

The 3 months correlation between DAX and HANetf is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and HANetf II ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANetf II ICAV and DAX Index is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DAX Index are associated (or correlated) with HANetf II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANetf II ICAV has no effect on the direction of DAX Index i.e., DAX Index and HANetf II go up and down completely randomly.

Pair Corralation between DAX Index and HANetf II

Assuming the 90 days trading horizon DAX Index is expected to generate 1.88 times more return on investment than HANetf II. However, DAX Index is 1.88 times more volatile than HANetf II ICAV. It trades about 0.2 of its potential returns per unit of risk. HANetf II ICAV is currently generating about -0.04 per unit of risk. If you would invest  1,998,432  in DAX Index on December 24, 2024 and sell it today you would earn a total of  290,736  from holding DAX Index or generate 14.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DAX Index  vs.  HANetf II ICAV

Pair Trading with DAX Index and HANetf II

The main advantage of trading using opposite DAX Index and HANetf II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, HANetf II can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HANetf II will offset losses from the drop in HANetf II's long position.

The idea behind DAX Index and HANetf II ICAV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.